Company cars glossary – your key to important fleet car words and phrases

If there’s one thing that the company car world is full of, it’s acronyms. And abbreviations. And initialisms. You simply can’t escape them, so it makes sense to get your head around what each of them means.

And that’s where we come in. We’ve put together this handy A to Z guide to the most common terms you’ll come across in the world of fleet and company cars.

In it, we give you a brief description of what each term means, and for many of them we also link to a more detailed explanation or advice page.

Read more company car advice

AFRs – advisory fuel rates

Anyone who uses their company car on business trips will use the advisory fuel rate to work out how much to claim back for the cost of fuel. The rates vary to cater for the type of fuel your car uses and how big its engine is (if it has one). The AFRs are reviewed every quarter (on the first day of March, June, September and December). For more information and current rates see our advisory fuel rates guide

AFV – alternatively fuelled vehicle

This term describes vehicles that don’t use petrol or diesel. In other words, it covers vehicles with a combustion engine that run on liquefied petroleum gas (LPG) or compressed natural gas (CNG). It also covers electric vehicles.

Read more: Best electric company cars

APR – annual percentage rate

This applies if you’ve opted out of your company’s fleet-car scheme and have instead bought your own car on finance. The APR is one way of indicating the amount of interest you pay each year.

BCH – business contract hire

Business contract hire is the system companies use to lease a fleet car. For more information see our business contract hire guide.

BEV – battery electric vehicle

This is another catch-all term for electric cars, electric vans and other electric vehicles. BEVs are a great option for fleet-car drivers because of their super-low company car tax rates. In general they cost more to lease than traditional petrol or diesel cars so you need to make sure your employer is happy to pay the extra.

Read more: Is it easy to run an EV as a company car?

BIK – benefit in kind

"Benefit in kind" is the term used by HMRC for any benefit you receive on top of your salary. Benefit-in-kind tax tends to apply to a fleet car you can use for private mileage when you're not working. For more information see our BIK tax guide.

Car allowance

If you don’t want a company car, you might find that your employer will give you an allowance towards buying and running your own car instead. There are positives and negatives to this. To help you decide which option is best for you see our company car or car allowance guide.

Diesel surcharge

Diesel’s popularity has plummeted over the past few years, with many people viewing it as a dirty option. That isn’t actually the case, but nevertheless, cars that do not meet the latest RDE2 emissions standard (explained below) are subject to a 4% surcharge. On the plus side, all cars built since January 2021 do meet those standards so your next company car is unlikely to be subject to it.

EV – electric vehicle

An EV is the same as a BEV (see above).

Grey fleet

The term “grey fleet” covers private cars used for business purposes. The positive side is that you're not constrained by your employer's company car choice list so you can run any model you like. The negative? Servicing and maintenance costs come out of your pocket not your employer’s.

HEV – hybrid electric vehicle

A hybrid powertrain blends a petrol or diesel engine with motor driven by a dedicated battery. A regular hybrid – also known as a full hybrid – can usually run for a short distance on electricity alone, but not as far as a PHEV (see below).

Income tax

Your income tax band will determine how much BIK tax you pay. HMRC has set three bands – a 20% rate, a 40% rate, and a 45% rate. When you earn less than £37,700 you’re subject to the 20% rate. Between £37,701 and £150,000 the 40% rate applies to you. Above £150,000, you’ll be subject to the 45% rate.

kW – kilowatt

The power of an electric motor is measured in kilowatts, in the same way as a petrol or diesel engine’s power is measured in brake horsepower (bhp). Electric car charging speeds are rated in kWs.

kWh – kilowatt hour

A kilowatt hour is the unit of measure for an electric vehicle battery’s capacity.

LCV – light commercial vehicle

The term LCV is used to describe a commercial vehicle that weighs less than 3500kg.

MAP – mileage allowance payments

MAPs are tax-free amounts you can claim if you use your own vehicle for business trips. The Government-mandated system allows you to claim 45p per mile for the first 10,000 miles you cover in a tax year, then 25p per mile thereafter.

Read more: Mileage allowance payments explained

MHEV – mild-hybrid electric vehicle

Like a HEV, an MHEV has a motor and battery as well as an engine, but cannot run on electricity alone. See our mild-hybrids guide.

NEDC – new European driving cycle

This was the old way for working out a car’s emissions and economy. However, it was reckoned to be so inaccurate that it was superseded in 2017 by the WLTP system (see below). CO2 figures from the NEDC system remain in use for tax purposes on cars registered before 6 April, 2020.

P11d

In reality, the P11d is simply a tax form but in fleet car parlance it describes the value of a new company car. The P11d price is the list price, plus delivery charges, the cost of any options, and VAT. The first year’s road tax (VED) and the registration fee are not included.

PHEV – plug-in hybrid electric vehicle

In essence, a PHEV is a hybrid vehicle with a bigger battery. This enlarged power source allows the car to travel a greater distance on battery power alone than conventional hybrid. And because of this, BIK rates are much lower for PHEVs than for traditional petrol and diesel cars, HEVs and MHEVs.

RDE2 – Real Driving Emissions 2

The “2” means we’re talking about the second-generation standard. Real-world RDE2 tests are run alongside the lab-based WLTP tests to make sure cars don’t produce significantly more pollutants on the road than in a lab. RDE2 allows an engine to emit 1.5 times the amount of NOx emissions permitted in lab testing.

SDP and SDP+C

These are insurance classifications that dictate what you can do with your car. SDP use only means social, domestic and pleasure use, but no work travel. However, an SDP+C policy also allows commuting. It’s vital that you make sure you have the correct policy for your needs, otherwise you could be prosecuting for driving without insurance.

Read more: Company car insurance guide

Tax band

Benefit-in-kind (BIK) tax bands of company cars are based on their CO2 emissions. If you have a PHEV, the distance it can cover on battery power alone is a factor too. Tax bandings for diesel cars vary depending on whether or not the car meets the RDE2 emissions standard (see above). You can check any car model's BIK tax rate and how much it will cost you each month by using our company car tax calculator.

Try our company car tax calculator

ULEZ – ultra-low emissions zone

Ultra-low emissions zones are active in cities all over the country. Under a ULEZ scheme, you will be charged to enter the area it covers if your car doesn’t meet specified emissions criteria. You need to do your research on any city before entering it.

VED – vehicle excise duty

Vehicle excise duty is what used to be known as road tax. Your vehicle’s emissions dictate how high the annual bill is.

WLTP – Worldwide harmonised light vehicle test procedure

This is the current test that’s used to work out a car’s official fuel economy and emissions figures. It replaced the old NEDC protocol (see above). Car makers must publish WLTP CO2 emissions as well as WLTP fuel economy figures for all new models. See our Real MPG calculator for an independent view of a car’s efficiency.

Read more fleet and company car advice

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